Correlation Between Naked Wines and Westrock Coffee
Can any of the company-specific risk be diversified away by investing in both Naked Wines and Westrock Coffee at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Naked Wines and Westrock Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Naked Wines plc and Westrock Coffee, you can compare the effects of market volatilities on Naked Wines and Westrock Coffee and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Naked Wines with a short position of Westrock Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and Westrock Coffee.
Diversification Opportunities for Naked Wines and Westrock Coffee
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Naked and Westrock is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee and Naked Wines is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Naked Wines plc are associated (or correlated) with Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of Naked Wines i.e., Naked Wines and Westrock Coffee go up and down completely randomly.
Pair Corralation between Naked Wines and Westrock Coffee
Assuming the 90 days horizon Naked Wines plc is expected to generate 2.76 times more return on investment than Westrock Coffee. However, Naked Wines is 2.76 times more volatile than Westrock Coffee. It trades about 0.01 of its potential returns per unit of risk. Westrock Coffee is currently generating about -0.03 per unit of risk. If you would invest 550.00 in Naked Wines plc on September 2, 2024 and sell it today you would lose (279.00) from holding Naked Wines plc or give up 50.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Naked Wines plc vs. Westrock Coffee
Performance |
| Timeline |
| Naked Wines plc |
| Westrock Coffee |
Naked Wines and Westrock Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and Westrock Coffee
The main advantage of trading using opposite Naked Wines and Westrock Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines position performs unexpectedly, Westrock Coffee can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Westrock Coffee will offset losses from the drop in Westrock Coffee's long position.| Naked Wines vs. Diageo PLC ADR | Naked Wines vs. Pernod Ricard SA | Naked Wines vs. Constellation Brands Class | Naked Wines vs. Brown Forman |
| Westrock Coffee vs. Campbell Soup | Westrock Coffee vs. ConAgra Foods | Westrock Coffee vs. Hormel Foods | Westrock Coffee vs. Kellanova |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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